Foreclosure Defenses: The Lender's Failure to Comply With HAMP
If your loan servicer did not comply with its obligations under HAMP, you may be able to use this as a defense to foreclosure.
If you applied for a mortgage modification through HAMP (the Home Affordable Modification Program) but your loan servicer did not comply with the requirements of the program, you may have a defense to a foreclosure action. Additionally, you can stop a foreclosure sale (even if only temporarily) by applying to HAMP. Read on to learn more about how applying for HAMP or how your loan servicer’s failure to comply with the program guidelines may help you fend off a foreclosure.
Overview of the Home Affordable Modification Program (HAMP)
The Home Affordable Modification Program (HAMP) is part of the government’s Making Home Affordable initiative. HAMP assists borrowers by lowering their first-lien mortgage payments with a loan modification.
You may qualify for a HAMP modification if you meet the following criteria:
- The mortgage was taken out on or before January 1, 2009.
- The mortgage debt does not exceed $729,750 on a primary residence or single unit rental property.
- The mortgage debt does not exceed $934,200 on a 2-unit rental property; $1,129,250 on a 3-unit rental property; or $1,403,400 on a 4-unit rental property.
- The property has not been condemned.
- You have suffered a financial hardship.
- If the mortgage is on your primary residence, you are either delinquent or in danger of becoming delinquent on your mortgage payments.
- If the mortgage is secured by property that is not your primary residence, you must be in default on the loan.
- Your current income will support a modified payment.
- You have not been convicted of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction within the last ten years.
If you are approved for HAMP, the loan servicer will give you a trial period plan, where you will be required to make reduced payments for a three-month period. So long as you successfully complete the trial period plan, and your financial information and eligibility remain the same, you will subsequently receive a permanent loan modification under HAMP.
To learn about HAMP and other government programs for struggling homeowners, visit Nolo's Government Foreclosure Prevention Programs area.
No Foreclosure During a Pending HAMP Evaluation
If you submit a complete HAMP application, your loan servicer must evaluate your eligibility for the program before referring the file to foreclosure or conducting a foreclosure sale. Likewise, if you are approved for a trial period plan under HAMP, all foreclosure activity must stop while you are making payments pursuant to the plan.
Scheduled foreclosure sales must be postponed. When a borrower submits a request for HAMP consideration after a foreclosure sale date has been scheduled, the loan servicer must suspend the sale as needed to evaluate the borrower for HAMP, as long as the request is received no later than midnight of the seventh business day prior to the foreclosure sale date.
Loan servicers do not have to postpone the sale if:
- you were previously determined ineligible for HAMP based on an initial package
- you failed to make one or more payments under a trial period plan, or
- you previously received a HAMP modification and lost good standing (that is, you missed three payments).
In most cases, a foreclosure sale cannot be conducted within 30 days of a HAMP denial. If you do not qualify for HAMP, or if you fail to comply with the terms of the trial period plan, you will be sent a Non-Approval Notice. In most circumstances, there is a 30-day borrower response period following the issuance of a Non-Approval Notice before a foreclosure sale may be conducted.
The loan can still be referred to foreclosure or any pending foreclosure action may continue during the 30-day period, however no foreclosure sale can be conducted unless certain circumstances apply. The loan servicer may conduct a foreclosure sale during this 30-day time period if the reason for the denial is:
- ineligible mortgage
- ineligible property
- you did not accept the HAMP offer
- you withdrew your HAMP request, or
- the loan was previously modified under HAMP.
You may have a defense to a foreclosure action if your loan servicer did not comply with HAMP guidelines. If you applied for HAMP, but your loan servicer failed to act in accordance with program guidelines when starting or continuing its foreclosure against you, you should speak to a qualified attorney who can advise you about what defenses are available in your particular situation and how to enforce your rights.
Applying for HAMP
You can stop a foreclosure sale by applying for HAMP, even though it may only be a temporary reprieve. To apply for the program, first find out if your loan servicer is participating in HAMP. All mortgage servicers of loans owned or guaranteed by Fannie Mae or Freddie Mac are required to participate in the program. To find out if either Fannie Mae or Freddie Mac owns your loan, go to www.fanniemae.com/loanlookup and www.freddiemac.com/mymortgage. Participation in HAMP is voluntary for servicers of non-Fannie Mae/Freddie Mac loans. A current list of participating servicers is available at www.makinghomeaffordable.gov/get-assistance/contact-mortgage/Pages/default.aspx.
Next, find out if you qualify for HAMP by using the online tool at http://www.makinghomeaffordable.gov/get-started/finding-the-right-program/Pages/default.aspx. This website only provides guidance about whether you may qualify for HAMP or another program under the Making Home Affordable initiative. It does not provide official acceptance into the program.
If your servicer is participating in the HAMP program, contact it and apply. (As of now, HAMP is scheduled to end on December 31, 2015.)
The loan servicer may not start or complete a foreclosure while it evaluates your application. Once the evaluation is complete, you will either be approved for a loan a modification trial period or the servicer will deny your application.
For More Information
If you have additional questions about applying for HAMP, or any other program under the Making Home Affordable initiative, call 1-888-995-HOPE (4673) or go to www.makinghomeaffordable.gov for more information.